Meeting the challenges of the economic downturn and of terrorism

Resolution by the General Assembly of UEAPME
6th December 2001

In its recent economic forecasts (Autumn 2001 Forecasts) the European Commission anticipates a GDP growth within the EU of only 1.7% for 2001 (2002: 1.4%), that means a reduction by 1,1 % points (2002: 1,5% points) compared with the Spring 2001 Forecasts. The recovery should start in spring 2002 and reach 2.9% in 2003. This sharp downturn is not primarily related to the dramatic event of 11 September 2001. It began already at the end of 2000 in the US and was followed by all major regions in the world before the attack.

Although the slowdown was triggered by external shocks (increasing oil and food prices) and related to enormous imbalances in the US economy, the current crisis shows that the EU economy was not able to absorb these shocks and depends too much on the US economic developments. The latest boom in Europe was more due to our exports than to our domestic strength.

The major obstacles to a quick upturn are perceived as:

  • synchronised crisis in all major economic regions,
  • dramatic decrease in consumer and business confidence,
  • sharp decrease in US private demand (burst of ICT bubble, previous over investment, raising of private saving rates),
  • stagnation in the development of world trade (after + 12% 2000).

The more critical situation in the US, which is already in a recession, makes it necessary that the European Union strengthens its efforts to meet these challenges and to take measures, which can bring the economy back to a sufficient growth path.

Therefore, the General Assembly of UEAPME expects from the different policy decision-makers, actions, which restore the confidence of businesses and consumers, by implementing the necessary economic reforms and by creating a more supportive macroeconomic environment. This would also reduce the dependency on the US economy by strengthening the domestic markets.

From UEAPME's point of view, a policy package to meet the current challenges has to be mid-term orientated and has to include the following elements in order to meet the needs of Crafts, Trades and SMEs:

  • Stabilisation of the long-term fiscal conditions. The Stability and Growth Pact should not be put into discussion, but the room for manoeuvre should be used: Allowing the automatic stabilisers to work.
  • The economic reforms proposed by the Lisbon and Stockholm Summits have to be fully implemented. The European economy suffers from the lack of confidence due to promises by the Heads of Governments, which were not fulfilled. Examples are the European Patent, VAT on e-Commerce and other tax measures, liberalisation of postal services and energy markets, reforms on financial markets, etc.
  • Lowering of non-wage labour costs. SMEs, especially in the service sector, are strongly affected by growing shadow economy. Reforms in the social security and taxation systems have to take place in order to allow a reduction of this burden and to reduce negative incentives from the systems on labour markets.
  • The European Union has to stick to its own schedules for the enlargement process in order to avoid further frustrations within the candidate countries and their economies.
  • Further budgetary reforms are necessary to gain room for investments in infrastructure and training as well as for further tax cuts by reducing expenditures for administration and consumption.
  • Promotion of new models (private public partnership, leasing) to finance infrastructure investments (preparation of enlargement, TEN) and investments, which will support the Kyoto targets (energy saving in buildings, etc.).
  • Wage moderation in line with productivity growth in order to gain competitiveness and purchasing power at the same time.
  • The necessary economic reforms together with moderate wage developments will give further possibilities to the ECB for interest rate reductions.
  • Stability within the global economy requires fair rules and a certain level of co-ordination. The successful WTO conference in Doha is seen as a positive contribution to improve the global business climate. Furthermore, the European Union should strengthen its efforts to support less developed countries (institutional building, training, crisis management and economic aid).

Europe can only take advantages of the Euro introduction, if the European and national institutions, which are responsible for the economic environment, do their homework by implementing commitments decided together within the Lisbon Strategy. Once again, SMEs will drive the next economic upswing. To increase SMEs capacity to grow and create employment, Europe's SME policy has to strengthen its efforts and become more effective. Therefore, UEAPME expects the implementation of the "European Small Business Charter", signed by the Heads of Governments at the EU Summit in Feira (2000).

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